"I'm rational. That's the answer. I'm rational." (Spoken by Charlie Munger when asked at a dinner party, "What one quality accounts for your enormous success?")
That's what I call a short-and-direct reply. That's the writing style I'd like to use in this article. I'm offering two stocks with outstanding payout yields and "great businesses" behind them. Period!
I also want to be "rational". Higher yields often reflect higher risk. Yet when a sector or industry falls out of favor stock prices fall and the yield-to-price goes higher, even as the risk factors remain constant.
Here's a telling 1-year price chart of UN with the 50-day and 200-day moving averages.
UN is a misunderstood dividend-grower that's knows how to increase profits and isn't afraid to sell non-core holding to increase cash. With the recent price-per-share below the June 24th correction low of $37.55 the annual dividend yield-to-price is close to 3.8%.
Many investors don't realize what UN is accomplishing as a company. In a recent article I pointed out why I'm convinced UN will grow its bottom-line earnings and increase its dividend in the year ahead.
Unilever publicly stated this summer, "Our ambition is to double the size of our business, whilst reducing our overall environmental footprint (including sourcing, consumer use and disposal) and increasing our positive social impact."
The company announced just 3 weeks ago that it signed an agreement for the sale of its Wish-Bone and Western dressings brands to Pinnacle Foods (NYSE:PF) or a total cash consideration of about $580 million, subject to regulatory approval.
How low will UN fall? On Tuesday September 3rd shares found support at $37.50, and the stock closed at $37.60 on almost double its daily average volume.
A reasonable strategy is to buy some shares near the current levels and if shares were to test the $34.80 52-week low buy a second helping that consists of 10% more shares than the first purchase.
Real Estate Investment Trusts (REITs) are "On Sale"
Thanks mostly to the sell-off of the 10-year Treasury bond, mortgage rates have spiked to levels not seen in 2 years. This helped cool down the overheated real estate markets and the REIT sector.
Some of the best-in-breed names are selling at prices we haven't seen since the 4th quarter of last year. The one I'd favor right now happens to be one of the oldest, best-managed REITs in America today.
Liberty Property Trust (LRY) provides leasing, property management, development, acquisition, and other tenant-related services for a portfolio of industrial and office properties.
It was founded in 1972 and it invests in industrial properties including various warehouse, distribution, service, assembly, light manufacturing, and research and development facilities. Its office properties include multi-story and single-story office buildings located principally in suburban mixed-use developments or office parks.
On Tuesday Sept.3rd LRY traded as low $33.57, just 54 cents above its 52-week low before closing the day at $33.96. The yield-to-price has risen to 5.64%.
LRY is a well-managed REIT with a trailing twelve month operating margin of over 34%. As of the end of the 2nd quarter 2013 it reported quarterly year-over-year earnings growth of nearly 18%.
The 1-year price chart below with the accompanying moving average lines is a pictures that spells "opportunity". This kind of sale happens usually once or twice a year and then the price of the units rise.
Feel Safer By Using "Stealth" Trailing Stop Loss Alerts
What happened with the consumer goods sector and the REITs isn't half as dramatic as the plunge in the precious metals producers earlier this year. It taught me some lessons about investing I'll not soon forget!
I'm becoming a firm believer in the importance of using a trailing stop loss alert system that can't be seen by the exchange's market-makers.
Instead of placing a trailing stop loss order with your brokerage firm that can be "picked off" in a mini-flash-crash moment, I'd recommend you do as I do and use a trailing stop alert system.
One of the best available today in my opinion is TradeStops and TradeStops Complete. You can create optimal trailing stop loss percentages that will keep you in the stock while protecting yourself from unacceptable losses.
You'll have an exit strategy from the moment you purchase a stock or option, and you'll choose rationally how much of your money you can afford to lose and follow disciplines that let your winners run.
Protecting your gains when the stocks you own are near the top of the trading ranges is all part of being a successful investor. The great investors like Charlie Munger and Warren Buffett always use an exit strategy.
Feeling the sting of watching the precious metals sector free-fall to unexpected lows, or the pain of watching your dividend-paying stocks begin to plummet should serve to remind us to use trailing stop loss alerts that fly under the radar of the forces that control the markets.
Appropriate position-sizing is another way to protect ourselves when we buy shares of the stocks we want to own.
In Conclusion and There You Have Them
I promised to show you two more great businesses with exceptional dividend yields. In the case of a REIT, dividends are often referred to as payouts from the Funds From Operation (FFO) or distributions.
With Unilever and Liberty Property Trust you'll not only experience a yield that is higher than a 10-year Treasury Bond, you'll also have the potential for significant capital gains since you're buying near the 52-week lows.
Please let this article also serve as a reminder to do all you can to avoid catastrophic losses by subscribing to a trailing stop alert system that isn't sponsored by a brokerage firm. At least do research about this.
Last but not least, do your own due diligence before buying shares of any company. Be as thorough as you can be, and by all means be rational.
Our emotions, especially our fears and our greed, do not serve us well. Remember Charlie Munger's words at the beginning of this article, and your emotions won't be able to undermine your investment efforts.
Disclosure: I am long UN, LRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.